If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase?
A) $11,000
B) $1,000
C) $900
D) $100

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) of 0.9 means that for every additional dollar of income, consumption increases by 90 cents. Therefore, if income increases by $1,000, consumption increases by 0.9 * $1,000 = $900.

If the Marginal Propensity to Consume Is 0